A former Liberal staffer being paid by Australian Water Holdings (AWH) has denied he fabricated a corruption charge against a senior bureaucrat opposed to granting the water company a lucrative contract.

Tim Koelma, the head of political consulting firm Eightbyfive, spent a third gruelling day in the witness box at the Independent Commission Against Corruption (Icac) in Sydney on Thursday denying the company was a Liberal party slush fund.

Koelma admitted he had “typed up” a complaint sent to Icac in 2010 alleging the then-head of Sydney Water Kerry Schott was paying kickbacks and making under-the-table deals.

But he maintained the allegations had been made by a former Sydney Water staffer named Robert, who had been referred to Koelma by the chief executive of AWH, Nick Di Girolamo.

Robert “was providing information that as I could see it could only come from someone inside Sydney Water,” Koelma said.

He was unable to provide Icac investigators with any contact details for the alleged whistleblower, saying Robert had always initiated contact, and only ever by phone. When the commissioner, Megan Latham, suggested that Robert’s phone number would have appeared on Koelma’s phone when he called, the witness appeared stumped.

Counsel assisting the inquiry, Geoffrey Watson, put it to the witness that “Di Girolamo initiated this [complaint] letter … he was behind it”.

“Absolutely not,” Koelma replied.

At the time of the false complaint, Eightbyfive was receiving monthly payments from AWH that totalled $183,000. The target of the complaint, Schott, was strongly opposed to granting AWH a public-private partnership that would have made millions for the company’s shareholders.

Icac has heard that Eightbyfive was a front company set up to channel illegal donations to Liberal party campaigns on the central coast.

On Wednesday, a fuller picture of the alleged scheme emerged. Bank records showed that in the months before the 2011 state election Koelma was withdrawing money from Eightbyfive and passing it to Liberal MPs Darren Webber and Christopher Spence.

Koelma said that Webber and Spence were Eightbyfive subcontractors, providing political and strategic advice to NSW property developers. But invoices from Webber showed he was being paid for “electrotechnology advice”, and Spence has denied ever meeting any of Eightbyfive’s clients.

On Thursday, Watson put it to the witness that the Liberal MP Chris Hartcher was also receiving money from Eightbyfive. “I can't recall any instance where I would have had any reason to do so,” Koelma said.

The invoices showing Eightbyfive’s payments to Webber and Spence were largely drawn up last year after Icac began investigating the company. Koelma says the original invoices were destroyed when his home-office was flooded in 2011. Watson said they had been "pulled together as some sort of shabby trick to justify the payments".

Payments from one property developer, Gazcorp, ceased when the NSW Liberal party won government in March 2011 and Koelma took a job in Hartcher’s office, but resumed again in September that year.

"As discussed, Eightbyfive now has a new management structure with new directors but will continue to provide the same services,” Koelma wrote at the time.

On the stand on Thursday, he said he never provided any services for Gazcorp when the payments resumed, and that the money was being paid for "the availability for those services".

Had Gazcorp requested any marketing work from Eightbyfive, Koelma said “theoretically” it would have been performed by his wife, but “that never came up”.

“Gazcorp are obviously just paying you under a sham arrangement,” Watson said.

“Absolutely not,” Koelma replied.

The payments from Gazcorp finally ended when NSW election funding authorities began to investigate Eightbyfive and Koelma was suspended from his job in Hartcher’s office. He was later employed by Di Girolamo at AWH.